Ballard Achieves Record Revenues in the Third Quarter 2002.Business Editors VANCOUVER Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. , British Columbia--(BUSINESS WIRE)--Oct. 30, 2002 Ballard Power Systems Ballard Power Systems (TSX: BLD, NASDAQ: BLDP), located in Burnaby, British Columbia -- a suburb of Vancouver -- is a company that designs, develops, and manufactures zero emission proton-exchange-membrane fuel cells. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :BLD BLD Build BLD Blood BLD Blade BLD Blonde BLD Breakfast Lunch Dinner BLD Bukas-Loob Sa Diyos (Filipino: Open In Spirit To God) BLD BASIC Bload Graphics (File Name Extension) BLD Below Limit of Detection ) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :BLDP BLDP Ballard Power Systems (stock symbol) ) today released its report to shareholders for the third quarter ended September September: see month. 30, 2002. All amounts are reported in U.S. dollars. Ballard's revenue in the third quarter was $28.0 million, compared to $9.7 million for the same period in 2001. Net loss for the quarter, including $3.0 million of costs related to the integration of XCELLSIS and Ecostar and foreign exchange losses of $9.5 million, was $40.2 million ($0.38 per share) compared to a loss of $20.4 million ($0.22 per share) for the same period in 2001. Excluding integration related costs the loss for the quarter was $37.2 million ($0.35 per share). The majority of the changes in financial results between the two periods were a result of the acquisition of XCELLSIS and Ecostar that occurred in November November: see month. 2001, combined with the overall growth in Ballard's business. "Our success in building the business is demonstrated by the increase in our revenues," said Firoz Rasul In Islam, a rasul ( رسول) (Arabic: "messenger," plural rusul) is a prophet sent by God ("Allah" in Arabic) with a revelation. According to the Qur'an, God has sent many prophets (anbiyaa, sing. nabi) to mankind. , Ballard's Chairman and Chief Executive Officer. "We will continue to invest our resources in a thoughtful and prudent manner, as we move our technology forward to develop products demanded by our customers. We have seen a heightened level of public activity by our automotive customers, we have introduced a number of new power generation products, and our customer base for our Nexa(TM) power module has expanded to 34 customers in 10 countries." At the end of the quarter, Ballard Ballard is a name used for a variety of people, places, and organizations: Places
Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments. Ballard reaffirmed its 2002 guidance for revenue from products and engineering services of $82 million and cash burn of between $122 million and $142 million, plus an additional $36 million related to integration activities. "To ensure a sustainable business A business is sustainable if it has adapted its practices for the use of renewable resources and holds itself accountable for the environmental and human rights impacts of its activities. and reduce the need for additional equity funding Equity funding An investment consisting of a life insurance policy and a mutual fund. The insurance policy is paid by the collateral value of fund shares, giving the investor the advantages of insurance protection with the growth potential of a mutual fund. , we are focused on significantly decreasing cash consumption," said Dennis Dennis is a male first name derived from the Greco-Roman name Dionysius meaning "servant of Dionysus", the Thracian god of wine, which is ultimately derived from the Greek Dios (Διος, "of Zeus") combined with Nysos or Nysa (Νυσα), where the Campbell Campbell, city, United States Campbell, city (1990 pop. 36,048), Santa Clara co., W Calif., in the fertile Santa Clara valley; founded 1885, inc. 1952. , Ballard's President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "We will selectively leverage our technology into near term products that can provide early revenues, expand our customer base, enhance our manufacturing expertise and lower component costs. We expect the new products that we've we've Contraction of we have. we've have introduced this year, including gensets, power electronics, electric drives and carbon fiber products for gas diffusion diffusion, in chemistry, the spontaneous migration of substances from regions where their concentration is high to regions where their concentration is low. Diffusion is important in many life processes. electrode electrode, terminal through which electric current passes between metallic and nonmetallic parts of an electric circuit. In most familiar circuits current is carried by metallic conductors, but in some circuits the current passes for some distance through a materials, to develop a foundation of revenue that will underpin our business as we move forward on a sustainable path to commercialization." In support of Ballard's cost reduction efforts, Ballard has suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. development of its 60 kW stationary Stationary can mean:
As well, because hydrogen hydrogen (hī`drəjən) [Gr.,=water forming], gaseous chemical element; symbol H; at. no. 1; at. wt. 1.00794; m.p. −259.14°C;; b.p. −252.87°C;; density 0.08988 grams per liter at STP; valence usually +1. has emerged as the fuel of choice for its automotive customers, Ballard is exploring ways to leverage its world-class world-class adj. 1. Ranking among the foremost in the world; of an international standard of excellence; of the highest order: a world-class figure skater. 2. fuel processing technology. These options include a partnership or joint venture, the licensing of Ballard's fuel processing technology to others, or the potential sale of the fuel processing business. Highlights from Ballard's third quarter include the following: DaimlerChrysler unveiled its newest generation fuel cell prototype Prototype A first or original model of hardware or software. Prototyping involves the production of functionally useful and trustworthy systems through experimentation with evolving systems. vehicle, the F-Cell. DaimlerChrysler will begin placing this fuel cell vehicle with customers in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , Japan, Singapore Singapore (sĭng`gəpôr, sĭng`ə–, sĭng'gəpôr`), officially Republic of Singapore, republic (2005 est. pop. 4,426,000), 240 sq mi (625 sq km). and the U.S. in 2003
as part of a 60-vehicle global fleet demonstration program. These
vehicles will feature Ballard's latest fuel cell powertrain,
including Ballard's electric drive system. This passenger car
program complements DaimlerChrysler's 30 fuel cell European Europeanemanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. bus demonstration program. DaimlerChrysler's Sprinter Van completed one year of operation with Hermes Hermes, in Greek religion and mythology Hermes, in Greek religion and mythology, son of Zeus and Maia. His functions were many, but he was primarily the messenger of the gods, particularly of Zeus, and conductor of souls to Hades. Versand, a delivery service company in Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). . During the first year of its two-year field trial program, the delivery vehicle travelled over 16,000 kilometers and averaged 60 stops a day. Honda honda a quick release metal eyelet for the end of a lariat. When the restrained animal is no longer required it is not necessary to slacken off the loop and pull it over the head—a very great advantage when working with wild cattle or unbroken horses. announced that the City of Los Angeles
Seven fuel cell vehicles participated in the California Fuel Cell Partnership The California Fuel Cell Partnership is a public-private partnership to promote hydrogen vehicles (including cars and buses) in California. It is notable as one of the first initiatives for that purpose undertaken in the United States. Coast Road Rally in September, travelling 300 miles from Monterey Monterey (mŏntərā`), city (1990 pop. 31,954), Monterey co., W Calif., a port on Monterey Bay; founded 1770, inc. 1850. It is a popular resort, the home of many artists and writers, and one of California's oldest cities. to Santa Barbara, California Santa Barbara is a city in California, United States. It is the county seat of Santa Barbara County, California. As of the 2000 census, the city had a total population of 92,325. . Ballard(R) fuel cells powered the DaimlerChrysler, Ford, Honda and Nissan vehicles Nissan has assembled and/or sold the following vehicles. Datsun
Ballard also delivered fuel cells and fuel cell engines during the quarter to a number of additional carmakers outside Ballard's automotive alliance to advance their fuel cell vehicle development programs. In September, Ford Motor Company announced it will focus its resources on fuel cell and hybrid vehicle For other types of "Hybrid Transportation", see . A hybrid vehicle (HV) is a vehicle that uses two or more distinct power sources to propel the vehicle such as: The electric car, EV, or simply electric vehicle is a battery electric vehicle (BEV) that utilizes chemical energy stored in rechargeable battery packs. , for which Ballard was to have supplied the electric drives. This change will not have a significant impact on Ballard. Ballard received an order from Gillig Gillig Corporation, formerly Gillig Bros., is a manufacturer of heavy-duty transit buses located in Hayward, CA. Prior to 1993, Gillig had also been a manufacturer of school buses. for three heavy-duty heav·y-dut·y adj. Made to withstand hard use or wear. heavy-duty Adjective made to withstand hard wear, bad weather, etc. Adj. 1. fuel cell bus engines to be demonstrated with Santa Clara Valley
The Santa Clara Valley is a valley just south of the San Francisco Bay in Northern California in the United States. Transit Authority in 2004. Gillig is the second largest transit bus A transit bus (also known as a commuter bus) in the United States is usually operated by an urban-suburban bus line, a governmental public transit agency, or a contractor. A transit bus is normally used on public transit routes. manufacturer in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . This order brings to eleven the number of transit agencies world-wide that will demonstrate buses powered by Ballard's most advanced heavy-duty fuel cell engine. Ballard has successfully tested prototypes of this latest heavy-duty fuel cell engine in Vancouver and in Germany and has begun shipping engines to DaimlerChrysler's Mannheim Mannheim (män`hīm), city (1994 pop. 318,025), Baden-Württemberg, W central Germany, on the right bank of the Rhine River and at the mouth of the Neckar River. A bridge connects it with Ludwigshafen, on the opposite bank of the Rhine. bus assembly plant for integration into buses for delivery in 2003 under the European Fuel Cell Bus Project. In July July: see month. , in support of Ballard's product strategy to leverage its technology in non-fuel cell applications to generate near-term near-term adj. Of, for, or involving a short period of time in the near future. revenues, reduce costs and develop the required manufacturing disciplines, Ballard introduced its first high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. natural gas fueled generator set, based on a Ford natural gas engine. With this product, capable of producing 80 kW for standby standby Medtalk adjective Referring to the immediate availability of a certain specialist–anesthesiologist, surgeon, who can be deployed in a medical emergency. Cf Concurrent. and backup power An additional power source that can be used in the event of power failure. See UPS and backup.  A Half Minute of Backup This roomful of lead acid batteries stands ready to drain itself entirely in less than a minute. applications, Ballard is offering its customers a better environmental solution, with a higher power Higher power is a term used in a 12-step program, such as Alcoholics Anonymous, to describe "a power greater than yourself." Although many participants equate their higher power with God, a belief in God or in formal religion is not mandatory; the higher power is intended as a density and a lower cost than is available today with a diesel genset For the corporation, see Genset Corporation. A genset (short for "generator setup") is the term used for a self-contained and dedicated electrical generation system, usually portable or mounted on a vehicle such as a boat. . Product shipments to customers will commence in the fourth quarter. In August, Ballard unveiled the world's first hydrogen combustion combustion, rapid chemical reaction of two or more substances with a characteristic liberation of heat and light; it is commonly called burning. The burning of a fuel (e.g., wood, coal, oil, or natural gas) in air is a familiar example of combustion. generator set, based on a Ford production engine modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. to use hydrogen. In addition to providing its customers with clean, siteable power, this new product will provide Ballard with early revenue opportunities, will increase public awareness of alternative fuels and power solutions and will assist in the development of a hydrogen infrastructure. A conference call will be held to discuss the results for the third quarter on Wednesday Wednesday: see week. , October October: see month. 30, 2002 at 6:00 a.m. PST PST Paroxysmal supraventricular tachycardia, see there (9:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy ). Access to the call may be obtained by calling the operator at 416.640.4127 before the scheduled start time. A playback Playback could mean:
around the clock, round the clock after the call at 416.640.1917. The confirmation number to access the playback is 211369#. The audio web cast can be accessed on Ballard's web site at www.ballard.com and will be archived for replay for two weeks. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are based on the beliefs of Ballard's management and reflect Ballard's current expectations as contemplated under the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the U.S. Private Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Reform Law of 1995. When used in this release, the words "estimate", "project", "believe", "anticipate", "intend", "expect", "plan", "predict", "may", "should", "will", the negative of these words or such other variations thereon there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that or comparable terminology The terminology used in the computer and telecommunications field adds tremendous confusion not only for the lay person, but for the technicians themselves. What many do not realize is that terms are made up by anybody and everybody in a nonchalant, casual manner without any regard or are intended to identify forward-looking statements. Such statements reflect the current views of Ballard with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in those forward-looking statements. MANAGEMENT'S DISCUSSION & ANALYSIS AND FINANCIAL STATEMENTS In this Management's Discussion & Analysis, unless the context otherwise requires, all references to "Ballard", "we", "us" and "our" refer to Ballard Power Systems Inc. Management's Discussion & Analysis This discussion and analysis covers our interim consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the three and nine-month periods ended September 30, 2002. As well, it provides an update to the discussion and analysis contained in our 2001 Annual Report. This discussion and analysis should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the "Management's Discussion & Analysis" section and the annual consolidated financial statements contained in our 2001 Annual Report. All amounts are expressed in U.S. dollars unless otherwise noted. OVERVIEW During 2001, we made three acquisitions that significantly expanded our business. On May 25, 2001, we acquired the carbon products division of Textron Founded in 1923 as the Special Yarns Company by Royal Little, Textron NYSE: TXT, today is a multi-industry company with a portfolio of familiar brands such as Bell Helicopter, E-Z-GO, Cessna Aircraft, Cadillac Gage and Greenlee, among others. Systems Inc. through our wholly-owned subsidiary, Ballard Material Products Inc. ("BMP (1) (BitMaP) Also known as a "bump" file, it is the native, bitmapped graphics format in Windows. A BMP can be saved in several color options: 1-, 4-, 8- and 24-bit color provide 2, 16, 256 and 16,000,000 colors respectively. BMP files use the .BMP or . "). On November 30, 2001, we increased our ownership of XCELLSIS AG (now called Ballard Power Systems AG ("BPSAG")) to 50.1% and agreed to acquire the remaining 49.9% on or before November 15, 2004. Also on November 30, 2001, we increased our ownership of Ecostar Electric Drive Systems L.L.C. (now called Ballard Power Systems Corporation ("BPSC BPSC Bear Paw Scout Camp (Mountain, Wisconsin) ")) to 100%. Our additional interests in BPSAG and BPSC were acquired from DaimlerChrysler AG ("DaimlerChrysler") and Ford Motor Company ("Ford") in exchange for common shares. Collectively, these three acquisitions are referred to in this discussion and analysis as the "Acquired Businesses". Due to the timing of the acquisitions of BPSAG and BPSC in 2001, these acquisitions account for the majority of the differences in the results for the three and nine-month periods ended September 30, 2002 from those reported in the comparative periods of 2001. To a lesser extent, the acquisition of BMP in May 2001 also accounted for some of the differences in the results for the nine-month period in 2002 relative to the corresponding period in 2001. As a result of the acquisitions, we changed the way we manage our business with respect to making operating decisions and assessing performance and therefore have changed our segmented reporting into five reportable segments: Technology and Corporate, Power Generation, Transportation, Electric Drives & Power Conversion, and Material Products. Technology and Corporate is comprised of the technology, development and manufacture of proton exchange membrane A proton exchange membrane (PEM) is a semipermeable membrane generally made from ionomers and designed to conduct protons while being impermeable to gases such as oxygen or hydrogen. ("PEM (Privacy Enhanced Mail) A standard for secure e-mail on the Internet. It supports encryption, digital signatures and digital certificates as well as both private and public key methods. Not widely used, work on PEM later evolved into S/MIME. See MIME. ") fuel cells and corporate administrative services. Our Power Generation Division develops, manufactures and markets PEM fuel cell power generation equipment for markets ranging from 1 kW portable power products to larger stationary generators. Our Transportation Division develops, manufactures and markets complete PEM fuel cell engines and PEM fuel cell components for the transportation market. The Electric Drives & Power Conversion Division develops, manufactures and markets electric drives for both PEM fuel cell and battery-powered Adj. 1. battery-powered - powered by one or more electric batteries; "a battery-powered radio" powered - (often used in combination) having or using or propelled by means of power or power of a specified kind; "powered flight"; "kerosine-powered jet engines" electric vehicles, power electronics for PEM fuel cell and combustion engine generators, microturbines and other distributed generation Distributed generation generates electricity from many small energy sources. It has also been called also called on-site generation, dispersed generation, embedded generation, decentralized generation, decentralized energy or products and assembles and markets combustion engine generators. The Material Products Division develops, manufactures and markets carbon fiber products primarily to automotive manufacturers for automotive transmissions and gas diffusion electrode materials for the PEM fuel cell industry. Our net loss for the quarter ended September 30, 2002 was $40.2 million, or ($0.38) per share, compared with a net loss of $20.4 million or ($0.22) per share during the same period in 2001. For the nine-month period ended September 30, 2002, our net loss was $112.4 million or ($1.07) per share, compared with a net loss of $60.1 million or ($0.67) per share during the same period in 2001. The higher losses for the three and nine-month periods were primarily due to losses of $14.3 million and $56.0 million from the Acquired Businesses, respectively, and $3.0 million and $16.5 million from business integration and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs, respectively. The increased loss for the quarter also reflects net foreign exchange losses of $9.5 million. The increased losses for 2002 were partly offset by lower research and development expenditures related to fuel cell stacks (1) See stack. (2) A folder viewing feature in Mac OS X 10.5 (Leopard). Clicking on a folder placed in the Mac Dock displays icons of all the files inside. They fan out onto the desktop for quick selection. (3) See DOS Stacks. due to cost reduction initiatives of $7.0 million and $12.5 million for the three and nine-month periods ended September 30, 2002, respectively. Cash used by operations and capital expenditures for the three and nine-month periods ended September 30, 2002, excluding acquisition and business integration and restructuring costs and related capital expenditures, were $37.7 million and $105.7 million, respectively. This compares to $16.6 million and $52.8 million for the respective three and nine-month periods in 2001. RESULTS OF OPERATIONS Revenues increased by $18.4 million or 190% to $28.0 million for the quarter ended September 30, 2002 compared to the same period last year. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. revenues increased by $38.8 million or 169% to $61.6 million from the comparative period in 2001. The improved revenues for 2002 reflect revenues from the Acquired Businesses of $12.6 million for the quarter and $32.5 million year-to-date. Revenues from the Acquired Businesses were primarily from the sale of PEM fuel cell engines by our Transportation Division, engineering services and other revenues from both our Transportation Division and our Electric Drives & Power Conversion Division, a $3.0 million termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. payment related to a contract with an OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and to manufacture power electronics for a microturbine application, and the sale of friction materials by our Material Products Division. Engineering service and other revenues for the three and nine-month periods ended September 30, 2002 were $17.2 million and $24.9 million, respectively. Engineering service revenues reflect the achievement of predefined program milestones for our customers. In September, Ford Motor Company announced it will focus its resources on fuel cell and hybrid vehicle development and that it would not proceed with its market introduction plans for the TH!NK City battery electric vehicles, for which Ballard was to have supplied the electric drives. This change will not have a significant impact on Ballard. Cost of product revenues for the three and nine-month periods ended September 30, 2002 increased from the same periods in 2001 by $9.2 million or 170% and $24.9 million or 142%, respectively. Cost of product revenues from the Acquired Businesses for the three and nine-month periods ended September 30, 2002, were $4.6 million and $23.0 million, respectively. The increase in cost of product revenues reflects the cost to manufacture PEM fuel cell engines sold by our Transportation Division and the cost of product revenues from our Electric Drives & Power Conversion Division. Due to the timing of the acquisition of the Acquired Businesses, there was significantly less cost of product revenues from these divisions in the comparative periods of 2001. Also included in cost of product revenues for the quarter is a provision of $4.8 million primarily related to conservative warranty An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party. Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. on firm orders received to supply bus engines for European field trials. As well, higher sales volumes of PEM fuel cells for automotive applications were a contributing factor to the increase in cost of product revenues. Research and product development expenses for the quarter ended September 30, 2002 increased by $7.5 million or 36% to $28.3 million as compared to expenditures of $20.8 million during the same quarter in 2001. For the nine-month period expenditures increased by $31.7 million or 57%, to $87.0 million as compared to expenditures of $55.2 million during the same period in 2001. These increases primarily reflect the research and product development expenses from the Acquired Businesses for development of light and heavy-duty PEM fuel cell vehicle engines and sub-systems, electric drive systems and power electronics. Research and product development activities related to fuel cell stacks during 2002 have decreased relative to 2001 due to cost reduction initiatives. Included in research and development are costs of $9.0 million for the quarter and $22.5 million year-to-date related to achieving predefined program milestones for our customers for which Ballard earned engineering service revenue. General and administrative and marketing expenses for the three and nine-month periods ended September 30, 2002 increased by $4.6 million or 130% and $14.2 million or 131%, respectively, from the corresponding periods in 2001. The increases primarily reflect the general and administrative and marketing expenses of the Acquired Businesses. As well, general and administrative and marketing expenses (excluding the Acquired Businesses) have increased slightly from the comparative periods in 2001 due to the recognition of non-cash share compensation expense related to general and administrative expenses as we prospectively adopted the new accounting standard for stock-based compensation in 2002 (see note 2 to the consolidated financial statements). Depreciation and amortization increased by $8.6 million to $11.0 million, compared to $2.4 million during the same period in 2001. For the nine-month period ended September 30, 2002, depreciation and amortization increased by $27.7 million to $34.1 million, compared to $6.4 million during the same period in 2001. The increases reflect the amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. and depreciation of the property, plant and equipment of the Acquired Businesses of $8.2 million and $25.5 million for the three and nine-month periods, respectively. The remainder of the increase relates to depreciation of plant and equipment acquired since September 30, 2001. Investment and other income (loss) declined by $14.0 million or 186% and $7.3 million or 37%, for the three and nine-month periods ended September 30, 2002, respectively. Foreign exchange losses for the quarter of $9.5 million compared to a foreign exchange gain of $1.5 million for the same period in 2001 was the primary reason for the decline. A decline in interest rates and lower average balances of cash and short-term investments also contributed to the decline in the quarter and were the primary reasons for the decline for the nine months ended September 30, 2002. Foreign exchange gains for the nine-month period in 2002 were $3.4 million compared to $2.6 million during the corresponding period in 2001. The following table provides a breakdown breakdown /break·down/ (brak´doun) 1. the act or process of ceasing to function. 2. an often sudden collapse in health. 3. loss of self-control. of our investment income and foreign exchange gains (losses), expressed in millions of dollars, for the reported periods:
Three months Nine months
ended September 30 ended September 30
2002 2001 2002 2001
-----------------------------------------
Investment income $ 3.0 $ 6.0 $ 9.2 $ 17.3
Foreign exchange gain (loss) (9.5) 1.5 3.4 2.6
-----------------------------------------
$ (6.5) $ 7.5 $ 12.6 $ 19.9
-----------------------------------------
-----------------------------------------
The foreign exchange gains and losses are primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the effect of the changes in the value of the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents relative to the U.S. dollar on our net Canadian dollar monetary assets. The significant loss in the quarter reflects the volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the of the Canadian dollar during the third quarter of 2002. Equity in loss of associated companies associated company associate n → Partnerfirma f associated company n → società collegata for the three and nine-month periods ended September 30, 2002 decreased by $6.6 million and $16.9 million, respectively, relative to the same periods in 2001. The decreases primarily reflect the change in accounting method for BPSAG and BPSC, which were previously recorded as equity investments but following their acquisition by us are now consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: . Minority interest for the quarter ended September 30, 2002 was $4.6 million compared to $0.4 million during the 2001 comparative period. Year-to-date, minority interest was $21.4 million compared to $3.7 million during the same period in 2001. The increases reflect the 49.9% minority interest portion of BPSAG's losses, partly offset by a reduced minority interest in the losses of Ballard Generation Systems Inc. ("BGS BGS British Geological Survey BGS Below Ground Surface (depth below the ground surface) BGS Bundesgrenzschutz (German: Federal Border Guard) BGS Bachelor of General Studies (degree) "). This is due to the reduction in the minority interest in BGS from 42.3% in September 2001 to 31.5% in September 2002 resulting from the acquisition by us of EBARA Corporation's interest in BGS in December December: see month. 2001. Business integration and restructuring costs of $3.0 million and $16.5 million during the three and nine-month periods ended September 30, 2002, respectively, relate to expenditures for severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when , the closure of facilities, asset write-downs and other expenditures associated primarily with realizing synergies from the acquisition of BPSAG and BPSC. Gain on the issuance of shares by subsidiary was nil for the three and nine-month periods ended September 30, 2002 and $0.1 million and $0.9 million for the three and nine month periods, respectively, in 2001. The comparative amounts for 2001 primarily include the issuance of shares of BGS. License income was nil in 2002 and $1.7 million for the three and nine-month periods ended September 30, 2001 and relates to the sale of manufacturing rights by BGS to EBARA Ballard. CASH FLOWS, LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS Cash, cash equivalents and short-term investments decreased by $128.0 million to $293.2 million as at September 30, 2002, compared to $421.2 million at the end of 2001. The decrease was primarily driven by increased net losses (excluding non-cash items) of $81.2 million, higher working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. of $33.3 million and capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. of $18.0 million, which were partly offset by the issuance of $6.1 million of share capital from the exercise of stock options. Included in cash used by operations and capital expenditures was the payment of $26.8 million of acquisition and business integration and restructuring costs and related capital expenditures. Cash used by operations was $35.0 million and $114.5 million for the three and nine-month periods ended September 30, 2002, respectively. This compares to $13.4 million and $39.9 million for the respective comparative periods of 2001. Net cash losses were higher primarily due to the cash requirements of BPSAG and BPSC, acquired in November 2001, and acquisition and business restructuring costs. Non-cash working capital requirements resulted in cash outflows of $6.5 million and $33.3 million during the respective three and nine-month periods ended September 30, 2002. For the quarter, the increase in non-cash working capital requirements was driven primarily by a $12.8 million increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying due to higher revenue during the quarter and invoice An itemized statement or written account of goods sent to a purchaser or consignee by a vendor that indicates the quantity and price of each piece of merchandise shipped. A consular invoice is one used in foreign trade. timing for engineering service and other revenues. This was partly offset by a $2.6 million increase in accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. , due to accruals for bonuses and insurance, and a $3.3 million increase in warranty liabilities primarily due to conservative accruals for potential warranty expenses related to firm orders received on bus engine deliveries. For the nine months ended September 30, 2002, the increase in year-to-date working capital requirements was primarily driven by a $15.5 million increase in accounts receivable, due to higher revenues and invoice timing for engineering service and other revenues, and a $19.0 million decline in accounts payable and accrued liabilities due to the net payment of $14.8 million for acquisition and business integration and restructuring costs. Inventory increased by $3.5 million year-to-date due to higher raw material inventories required for planned increases in production for transportation bus and passenger PEM fuel cell engines and electric drives and power conversion products. Investing activities resulted in cash inflows of $22.1 million for the quarter and $52.2 million year-to-date. The inflows for the three and nine-month periods consist primarily of decreases in short-term investments of $28.6 million and $71.7 million, respectively, partly offset by capital spending of $6.0 million for the quarter and $18.0 million year-to-date. The decrease in short-term investments resulted from changes in the duration of our investment portfolios to optimize optimize - optimisation investment returns. Capital spending was primarily for manufacturing equipment and for facility modifications related to the consolidation of locations. Financing activities resulted in a cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of almost nil for the quarter and $6.1 million year-to-date, consisting primarily of proceeds from the issuance of share capital resulting from the exercise of employee stock options. As at September 30, 2002, we had 105,359,882 common shares and one Class A share and one Class B share issued and outstanding. As at that date, we also had outstanding employee stock options to purchase 8,828,604 common shares, and warrants to purchase 450,000 common shares which expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on October 29, 2002. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2002, we had cash, cash equivalents and short-term investments totaling $293.2 million. We will use our funds to meet capital funding requirements for the development and commercialization of products in our target markets. This includes research and product development for PEM fuel cell products, electric drives and power conversion products, the purchase of equipment for our manufacturing facilities and the further development of high-volume manufacturing processes and business systems. Our actual funding requirements will vary depending on a variety of factors, including our success in integrating BPSAG and BPSC, the progress of our research and development efforts, our relationships with our strategic partners, our commercial sales and the results of our development and demonstration programs. We expect to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. net losses for the next several years as we continue to make investments in research and product development activities required to commercialize our products. In 2002, we expect our cash requirements for ongoing operations and capital expenditures, excluding acquisition and business integration and restructuring costs, to be between $122 million and $142 million. During 2002, we expect to fund $36 million in cash requirements related to acquisition and business integration and restructuring costs as a result of the acquisition of BPSAG and BPSC. Of that amount $18 million is related to paying accruals of costs made in 2001. The 2002 expenditures are for severance, the closure of facilities and other expenditures associated primarily with realizing synergies from the acquisition of BPSAG and BPSC. For the nine months ended September 30, 2002 acquisition and business integration and restructuring related cash expenditures were $26.8 million, of which $14.8 million related to paying accruals of costs made in 2001. Based on our current business strategy, as BPSAG and BPSC are fully integrated into Ballard, we expect our 2003 and 2004 total cash requirements, excluding any cash required for merger and acquisition activity, to decline relative to 2002. We believe that our cash, cash equivalents and short-term investments will provide us with sufficient capital to fund our current operations through 2004. Under our current business plan, we intend to raise additional capital before 2004 to develop our business. If we undertake any new equity offering before November 30, 2004, DaimlerChrysler and Ford have agreed to invest at least CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. $55 million in Ballard. At that time, DaimlerChrysler would invest CDN $30.0 million and Ford would invest CDN $25.0 million. If external sources of financing are not available when needed or on acceptable terms, or if we experience significant cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor on any of our programs for which we cannot obtain additional funds, certain of our research and development activities or investments in manufacturing capacity may be delayed or eliminated. This may result in potential delays in the commercialization of our products. In addition, we regularly review acquisition opportunities and, depending on the size of the transaction, we may be required to raise additional capital through the issuance of equity or debt. If we are unable to raise additional capital on acceptable terms, we may be unable to pursue these acquisition opportunities. We are developing revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to our current business plan that would enable our cash resources to be sufficient to fund our operations beyond 2004. A goal of our revised business plan will be to reduce the need to raise additional equity capital to develop our business. CRITICAL ACCOUNTING POLICIES Our consolidated financial statements are prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), which requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements. We believe that the critical accounting policies affecting our consolidated financial statements are the following: Inventory Provision In establishing the appropriate provision for inventory, we estimate the likelihood that inventory carrying values Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. will be affected by changes in market demand for our products and by changes in the technology, which could make inventory on hand obsolete OBSOLETE. This term is applied to those laws which have lost their efficacy, without being repealed, 2. A positive statute, unrepealed, can never be repealed by non-user alone. 4 Yeates, Rep. 181; Id. 215; 1 Browne's Rep. Appx. 28; 13 Serg. & Rawle, 447. . Where we determine that such changes have occurred and will have a negative impact on current inventory on hand, appropriate provisions are made. Unforeseen changes in these factors could result in additional inventory provisions being required. Recoverability of Intangible Assets and Goodwill As a result of the acquisitions made in 2001, we recorded a significant amount of intangible assets and goodwill on our balance sheet. In accordance with Canadian GAAP, we do not amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. goodwill, and we amortize intangible assets over a period ranging from 5 to 15 years. At least annually, we review the carrying value of our intangible assets and goodwill for potential impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. . Should circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or indicate that an impairment in the value of these assets has occurred, we would record this impairment in the earnings of the current period. Warranty Provision In establishing the accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. warranty liability, we estimate the likelihood that products sold will experience warranty claims. In making such determinations, we use estimates based on the nature of the contract and past and projected experience with the products. Should these estimates prove to be incorrect Incorrect means to not be correct and may also refer to:
Revenue Recognition We earn revenues under certain contracts to provide engineering services. These contracts provide for the payment for services based on our achieving defined milestones. Revenues are recognized under these contracts based on conservative assessments of progress achieved against these milestones. There is risk that the customer may ultimately disagree with Verb 1. disagree with - not be very easily digestible; "Spicy food disagrees with some people" hurt - give trouble or pain to; "This exercise will hurt your back" our assessment of the percentage of work completed. Should this occur, the revenues recognized in the period might require adjustment in a subsequent period. RISKS & UNCERTAINTIES Risks & uncertainties related to economic and industry factors are discussed in detail in the "Management's Discussion & Analysis" section of our 2001 Annual Report and remain substantially unchanged.
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
Unaudited
September 30, 2002 December 31, 2001
----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 84,483 $ 140,774
Short-term investments 208,755 280,475
Accounts receivable 32,858 17,312
Inventories 31,529 28,046
Prepaid expenses 2,368 873
----------------------------------------------------------------------
359,993 467,480
Property, plant and equipment 105,208 109,006
Intangible assets 146,609 170,453
Goodwill (note 3) 185,039 184,930
Investments 27,260 26,241
Other long-term assets 2,013 1,209
----------------------------------------------------------------------
$ 826,122 $ 959,319
----------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 42,960 $ 58,111
Deferred revenue 4,226 1,944
Accrued warranty liabilities 21,731 17,818
----------------------------------------------------------------------
68,917 77,873
Long-term liabilities 9,393 7,723
Minority interest 15,302 36,517
----------------------------------------------------------------------
93,612 122,113
Shareholders' equity:
Share capital (note 2) 1,059,497 1,051,811
Accumulated deficit (326,987) (214,605)
----------------------------------------------------------------------
732,510 837,206
----------------------------------------------------------------------
$ 826,122 $ 959,319
----------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Operations and Accumulated Deficit
(Expressed in thousands of U.S. dollars,
except per share amounts and number of shares)
Unaudited
----------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2002 2001 2002 2001
----------------------------------------------------------------------
Product revenues $ 10,829 $ 6,199 $ 36,702 $ 19,416
Engineering service and
other revenue 17,206 3,467 24,943 3,467
--------------------------------------------------
Total revenues 28,035 9,666 61,645 22,883
Cost of revenues and expenses:
Cost of product revenues 14,689 5,441 42,384 17,532
Research and product
development 28,265 20,790 86,972 55,243
General and administrative 6,071 2,881 17,976 8,366
Marketing 2,063 651 7,028 2,467
Depreciation and
amortization 11,012 2,411 34,098 6,389
Capital taxes 61 (77) 190 66
--------------------------------------------------
62,161 32,097 188,648 90,063
--------------------------------------------------
Loss before undernoted (34,126) (22,431) (127,003) (67,180)
Investment and other
income (loss) (6,466) 7,504 12,601 19,874
Equity in loss of
associated companies (779) (7,423) (1,584) (18,445)
Minority interest 4,648 426 21,418 3,690
Business integration and
restructuring costs (2,999) - (16,477) -
Gain on issuance of shares
by subsidiary - 74 - 939
License income - 1,715 - 1,715
--------------------------------------------------
Loss before income taxes (39,722) (20,135) (111,045) (59,407)
Income taxes 470 218 1,337 731
--------------------------------------------------
Net loss for period (40,192) (20,353) (112,382) (60,138)
Accumulated deficit,
beginning of period (286,795) (157,993) (214,605) (118,208)
--------------------------------------------------
Accumulated deficit,
end of period $ (326,987)$ (178,346) $ (326,987)$ (178,346)
--------------------------------------------------
Loss per share $ (0.38)$ (0.22) $ (1.07)$ (0.67)
--------------------------------------------------
Weighted average number
of common shares
outstanding 105,344,397 90,482,909 105,219,320 90,088,396
--------------------------------------------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
Unaudited
----------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2002 2001 2002 2001
----------------------------------------------------------------------
Cash provided by (used for):
Operating activities:
Net loss for period $ (40,192) $ (20,353) $(112,382) $ (60,138)
Items not affecting cash:
Gain on issuance of
shares by subsidiary - (74) - (939)
License income - (1,715) - (1,715)
Compensatory shares 1,827 - 5,436 -
Depreciation and
amortization 12,740 3,268 38,865 8,211
Loss on sale and
writedowns of property,
plant and equipment 957 - 6,697 -
Equity in loss of
associated companies 779 7,423 1,584 18,445
Minority interest (4,648) (426) (21,418) (3,690)
-----------------------------------------------
(28,537) (11,877) (81,218) (39,826)
-----------------------------------------------
Changes in non-cash working capital:
Accounts receivable (12,774) (170) (15,546) (4)
Inventories 8 (2,409) (3,483) (6,544)
Prepaid expenses (1,031) 48 (1,495) (57)
Accounts payable and
accrued liabilities 2,580 3,998 (18,990) 7,951
Deferred revenue 1,372 114 2,282 68
Accrued warranty
liabilities 3,342 (3,090) 3,913 (1,452)
-----------------------------------------------
(6,503) (1,509) (33,319) (38)
-----------------------------------------------
Cash used by operations (35,040) (13,386) (114,537) (39,864)
-----------------------------------------------
Investing activities:
Net decrease (increase) in
short-term investments 28,634 (105,756) 71,720 1,400
Additions to property,
plant and equipment (6,017) (3,179) (17,980) (12,946)
Proceeds on sale of
manufacturing rights - 3,362 - 3,362
Proceeds on sale of
fixed assets 28 - 154 -
Investments (279) (4,118) (2,603) (12,589)
Acquisition of other
companies - 109 - (14,301)
Other long-term assets (635) (4,475) (804) (4,406)
Long term liabilities 344 - 1,706 -
-----------------------------------------------
22,075 (114,057) 52,193 (39,480)
-----------------------------------------------
Financing activities:
Net proceeds on issuance
of share capital 68 335 6,110 8,821
Proceeds on issuance of
shares by subsidiary - - - 2,353
Other (19) (20) (57) (58)
-----------------------------------------------
49 315 6,053 11,116
-----------------------------------------------
Decrease in cash and
cash equivalents (12,916) (127,128) (56,291) (68,228)
Cash and cash equivalents,
beginning of period 97,399 240,194 140,774 181,294
-----------------------------------------------
Cash and cash equivalents,
end of period $ 84,483 $ 113,066 $ 84,483 $ 113,066
-----------------------------------------------
Supplemental disclosure of cash flow information (note 4).
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
(Tabular amounts expressed in thousands of U.S. dollars, except per
share amounts and number of shares)
Unaudited
1. Basis of Presentation:
The accompanying financial information reflects the same
accounting policies and methods of application as Ballard's 2001
Annual Report except as described in Notes 2 and 3 below. The
accompanying financial information does not include all disclosure
required under Canadian generally accepted accounting principles
("GAAP") because certain information included in Ballard's 2001 Annual
Report has not been included in this report. These consolidated
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in
Ballard's 2001 Annual Report.
Certain comparative figures have been reclassified to conform with
the basis of presentation adopted in the current year.
2. Share Capital:
Effective January 1, 2002, Ballard adopted, on a prospective
basis, the standards in section 3870 of the Canadian Institute of
Chartered Accountants Handbook ("CICA") for accounting for stock-based
compensation. The new standard requires Ballard to account for direct
share awards and grants of options to non-employees using the fair
value method of accounting for stock-based compensation. Options
granted to employees and directors will be accounted for using the
intrinsic value method of accounting for stock-based compensation.
Accordingly, no compensation cost has been recognized for such grants
of options to employees and directors as the exercise price is equal
to the market price of the stock on the date of grant.
On May 16, 2002, Ballard granted options to purchase 2,586,374
common shares with exercise prices of $24.91 in United States dollars
and $38.75 in Canadian dollars per common share. On July 22, 2002,
Ballard granted options to purchase an additional 135,000 common
shares with exercise prices of $26.30 and $43.80 Canadian dollars per
share. Options were granted with vesting periods of between two and
three years.
If compensation costs for Ballard's employee stock option plans
had been determined using the fair value method of accounting for
stock-based compensation, for the three months ended September 30,
2002 Ballard's net loss would have increased by $4,104,000 to
$44,296,000 and the net loss per common share would have increased by
$0.04 per share to $0.42 per share. For the nine months ended
September 30, 2002, the net loss would have increased by $6,075,000 to
$118,457,000 and by $0.06 per share to $1.13 per share.
The options granted in 2002 had fair values between $7.43 and
$18.55 per share. The fair value was determined using the
Black-Scholes valuation model assuming an average option life of seven
years, no dividends, expected volatility of between 74% to 79% and a
risk-free interest rate of 5%.
Under the new accounting standard, Ballard's share distribution
plan is deemed to be compensatory which resulted in a compensatory
charge to the income statement of $1,827,000 and $5,436,000 for the
three and nine-month periods ended September 30, 2002, respectively.
As at September 30, 2002, options to purchase 8,828,604 common
shares were outstanding.
3. Goodwill:
As of January 1, 2002, Ballard adopted the standard in Section
3062 "Goodwill and Other Intangible Assets", of the Canadian Institute
of Chartered Accountants Handbook to be applied prospectively. Under
the new standard, goodwill is no longer amortized but tested for
impairment on an annual basis and the excess of the carrying value
amount over the fair value of goodwill is charged to earnings. For the
three and nine months ended September 30, 2001, Ballard recorded
$15,000 of goodwill amortization.
4. Supplemental disclosure of cash flow information:
----------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2002 2001 2002 2001
----------------------------------------------------------------------
Interest paid $ 5 $ 3 $ 14 $ 15
Income taxes paid $ 53 $ 82 $ 363 $ 415
Non-cash financing and investing
activities
Compensatory shares $ 253 $ - $ 1,576 $ -
Common shares issued for
long-term investments $ - $ 678 $ - $ 9,338
----------------------------------------------------------------------
5. Segmented financial information:
As a result of the acquisition of Ballard Power Systems AG
("BPSAG") and Ballard Power Systems Corporation ("BPSC") in 2001,
Ballard changed the way it manages its business with respect to making
operating decisions and assessing performance. As a result, beginning
in 2002, Ballard has changed its segmented disclosure into five
reportable segments: Technology and Corporate, Power Generation,
Transportation, Electric Drives & Power Conversion, and Material
Products.
Technology and Corporate is comprised of the technology,
development and manufacture of proton exchange membrane ("PEM") fuel
cells and corporate administrative services, respectively. Ballard's
Power Generation Division develops, manufactures and markets PEM fuel
cell power generation equipment for markets ranging from 1 kW portable
power products to larger stationary generators. Ballard's
Transportation Division develops, manufactures and markets PEM fuel
cell components and complete PEM fuel cell engines for the
transportation market. The Electric Drives & Power Conversion Division
develops, manufactures and markets electric drives for both PEM fuel
cell and battery-powered electric vehicles, power electronics for PEM
fuel cell and combustion engine generators, microturbines and other
distributed generation products and assembles and markets combustion
engine generators.
The Material Products Division develops, manufactures and markets
carbon fiber products primarily to automotive manufacturers for
automatic transmissions and gas diffusion electrode materials to the
PEM fuel cell industry.
The comparative figures have been reclassified to conform with the
segmented disclosure adopted in the current year.
Three months ended Electric
September 30, Drives
2002 Technology Power Transpor- & Power Material
& Corporate Generation tation Conversion Products Total
----------------------------------------------------------------------
Total revenues
for reportable
segments $ - $ 1,035 $ 19,400 $ 4,475 $ 3,849 $ 28,759
Elimination of
intersegment
revenues - - - (195) (529) (724)
---------------------------------------------------------
Total revenues
from external
customers $ - $ 1,035 $ 19,400 $ 4,280 $ 3,320 $ 28,035
---------------------------------------------------------
Segment income
(loss) for
period $ (13,482) $(4,239) $ (9,842)$ (7,872) $ 540 $(34,895)
---------------------------------------------------------
Identifiable
assets $ 394,986 $32,371 $102,236 $ 92,000 $19,490 $641,083
---------------------------------------------------------
Goodwill $ - $ 524 $ 80,481 $102,727 $ 1,307 $185,039
---------------------------------------------------------
Reconciliation of net loss for period
----------------------------------------------------------------------
Segment loss for period $(34,895)
Investment and other income (expense) (6,466)
Business integration and restructuring costs (2,999)
Minority interest 4,648
Other (10)
----------------------------------------------------------------------
Loss before income taxes $(39,722)
----------------------------------------------------------------------
Three months ended Electric
September 30, Drives
2001 Technology Power Transpor- & Power Material
& Corporate Generation tation Conversion Products Total
----------------------------------------------------------------------
Total revenues
from external
customers $ - $ 719 $ 5,714 $ - $ 3,233 $ 9,666
---------------------------------------------------------
Segment income
(loss) for
period $(19,283) $(3,785) $ (6,212)$ (1,234) $ 583 $(29,931)
---------------------------------------------------------
Identifiable
assets $512,137 $38,248 $ 32,184 $ 28,880 $17,614 $629,063
---------------------------------------------------------
Goodwill $ - $ 219 $ - $ - $ 883 $ 1,102
---------------------------------------------------------
Reconciliation of net loss for period
----------------------------------------------------------------------
Segment loss for period $(29,931)
Investment and other income (expense) 7,504
Gain on issuance of shares by subsidiary 74
Minority interest 426
License income 1,715
Other 77
----------------------------------------------------------------------
Loss before income taxes $(20,135)
----------------------------------------------------------------------
Nine months ended Electric
September 30, Drives
2002 Technology Power Transpor- & Power Material
& Corporate Generation tation Conversion Products Total
----------------------------------------------------------------------
Total revenues
for reportable
segments $ - $ 1,670 $ 42,719 $ 7,390 $11,891 $ 63,670
Elimination
of intersegment
revenues - (6) (4) (728) (1,287) (2,025)
---------------------------------------------------------
Total revenues
from external
customers $ - $ 1,664 $ 42,715 $ 6,662 $10,604 $ 61,645
---------------------------------------------------------
Segment income
(loss) for
period $(44,360) $(14,822) $(42,110)$(28,496)$ 1,340 $(128,448)
---------------------------------------------------------
Identifiable
assets $394,986 $ 32,371 $102,236 $ 92,000 $19,490 $ 641,083
---------------------------------------------------------
Goodwill $ - $ 524 $ 80,481 $102,727 $ 1,307 $ 185,039
---------------------------------------------------------
Reconciliation of net loss for period
----------------------------------------------------------------------
Segment loss for period $(128,448)
Investment and other income (expense) 12,601
Business integration and restructuring costs (16,477)
Minority interest 21,418
Other (139)
----------------------------------------------------------------------
Loss before income taxes $(111,045)
----------------------------------------------------------------------
Nine months ended Electric
September 30, Drives
2001 Technology Power Transpor- & Power Material
& Corporate Generation tation Conversion Products Total
----------------------------------------------------------------------
Total revenues
from external
customers $ - $ 2,385 $ 15,918 $ - $ 4,580 $ 22,883
--------------------------------------------------------
Segment income
(loss) for
period $(46,755) $(16,592)$(19,782) $ (3,172) $ 742 $(85,559)
--------------------------------------------------------
Identifiable
assets $512,137 $ 38,248 $ 32,184 $ 28,880 $17,614 $629,063
--------------------------------------------------------
Goodwill $ - $ 219 $ - $ - $ 883 $ 1,102
--------------------------------------------------------
Reconciliation of net loss for period
----------------------------------------------------------------------
Segment loss for period $(85,559)
Investment and other income (expense) 19,874
Gain on issuance of shares by subsidiary 939
Minority interest 3,690
License income 1,715
Other (66)
----------------------------------------------------------------------
Loss before income taxes $(59,407)
----------------------------------------------------------------------
6. Financial Instruments:
Ballard enters into forward exchange contracts to manage exposure
to currency rate fluctuations. The purpose of Ballard's foreign
currency hedging activities is to minimize the effect of exchange rate
fluctuations on business decisions and the resulting uncertainty on
future financial results.
As at September 30, 2002, Ballard has forward contracts to
purchase 24,987,411 EUR which mature during 2002 and 2003. At
September 30, 2002, Ballard would receive $1,390,716 to settle its
outstanding forward exchange contracts. As these forward exchange
contracts qualify for accounting as hedges, gains or losses are
deferred and recognized in the same period and in the same financial
statement category as the gains or losses on the corresponding hedged
transactions.
Ballard Power Systems is recognized as the world leader in
developing, manufacturing and marketing zero-emission proton exchange
membrane fuel cells. Ballard is commercializing fuel cell engines for
transportation applications and fuel cell systems for portable and
stationary products ranging from 1 kilowatt to 250 kilowatts. Ballard
is also commercializing electric drives for fuel cell and other
electric vehicles, power conversion products, natural gas and hydrogen
generator sets and is a Tier 1 automotive supplier of friction
materials for power train components. Ballard's proprietary technology
is enabling automobile, bus, electrical equipment, portable power and
stationary product manufacturers to develop environmentally clean
products for sale. Ballard is partnering with strong, world-leading
companies, including DaimlerChrysler, Ford, EBARA, ALSTOM and
FirstEnergy, to commercialize Ballard(R) fuel cells. Ballard has
supplied fuel cells to Honda, Nissan, Volkswagen, Yamaha, Cinergy,
Coleman Powermate and Matsushita Electric Works, among others.
Ballard's Common shares are listed on The Toronto Stock Exchange
under the trading symbol "BLD" and on the Nasdaq National Market
System under the symbol "BLDP". Ballard, the Ballard logo and Power to
Change the World are registered trademarks of Ballard Power Systems
Inc. Nexa is a trademark of Ballard Power Systems Inc.
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